Tata gropes for ways to rescue JLR
Tata Motors Ltd has agreed to inject 'tens of millions' of pounds into Jaguar Land Rover to prevent an immediate cash flow crisis, the Financial Times reported.business Updated: Dec 22, 2008 23:54 IST
Tata Motors is scouting for options to bail out its ailing subsidiary in UK, Jaguar Land Rover (JLR), even as the company maintained it has not officially heard from the UK government about the bailout package, currently being discussed.
Ambivalence over whether JLR has received the government’s nod for the bailout package reigned in the UK with The Times reporting on Monday that “a planned government bailout worth tens of millions of pounds to keep JLR afloat has helped the company’s owners to secure last-minute funding”.
“Gordon Brown had decided to intervene to prevent the collapse of the carmaker and was preparing to announce a short-term bailout package today or tomorrow,” the report said. “A combination of tough rhetoric in public and private reassurance appears to have helped the Tata Group to secure enough cash to postpone the bailout until after Christmas.”
A source close to Tata Motors said despite the recession and fall in Tata Motors’s stock prices, it was capable of raising more capital. He did not wish to be quoted.
“The company’s market capitalisation has taken a beating in recent months and has fallen below what we had paid to acquire the companies,” he said. “Fresh capital is, however, needed to take care of JLR’s needs.”
Tata Motors’s market capitalisation stands at Rs 9,200 crore, down 60 per cent since June 2, when it took over JLR.
JLR is part of UK’s Society of Motor Manufacturers and Traders (SMMT) which is discussing the possibility of short-term credit and loan-guarantee schemes from the British government.
According to reports, if the bailout package does not come, it would lead to loss of 75,000 jobs in the UK. “Currently, negotiations with the UK government are channelled through the SMMT which is the lobby for all carmakers,” said a Tata Motors spokesperson.
JLR employs about 16,000 workers in the UK and has already announced 600 voluntary redundancies, the spokesperson added.